Meeting Details

The Democratic Services Officer advised the Committee that there had been a typographical error in the published minutes (minute 445), and the correct backstop date for the completion of all outstanding local authority audits up to and including 2022/2023 was in fact 13 December 2024, and not 30 December 2024 as stated.

RESOLVED that: the minutes of the meeting held on 10 September 2024 be confirmed as a correct record, subject to minute 445 being amended to change 30 December 2024 to 13 December 2024. 

The Committee considered a report requesting that it review, consider and comment on the Governance Assurance Statement of Colchester Borough Homes.

The Chair of the Committee requested that particular attention be given in the presentation of the report to outlining the advantages which were provided through the provision of services via the Council’s wholly owned company, as opposed to sourcing these services from an external provider. The Committee, in its role as shareholder committee would benefit from assurance on this point.

Philip Sullivan, Chief Executive of Colchester Borough Homes (CBH), attended the meeting remotely to present the report and assist the Committee with its enquiries.

The Committee heard that the report which was before it which presented the Governance and Assurance Statement of CBH to the City Council and specifically the Committee in its role as shareholder committee. The Annual Governance Statement (AGS) was appended to the report and included details of the financial position of CBH, together with details of the Finance and Audit Committee of CBH which oversaw risk strategy and the risk programme.

One of the areas in which CBH provided additional value to the Council was the experience that was present in its Finance and Audit Committee, and the Board of CBH which was specific to housing, for example the Chair of CBH’s Finance and Audit Committee was also an Executive Director of a Housing Association.

Contained within the report was a summary of the 2023/2024 financial statements, which had been signed off with a clean audit opinion. A link to the complete set of financial statements which had been lodged with Companies House had been provided in the report. Details of internal audit outcomes had also been provided in the AGS which had been very positive, as had been the Head of Internal Audit’s annual opinion.

In response to questions which had been raised at a previous Committee meeting, a high level breakdown of the management fees of CBH was before the Committee, but this was focussed on, and limited to, the activities of CBH and did not cover the wider Housing Revenue Account (HRA), which was currently the subject of a wider review.

The Committee was asked to consider, comment on and accept the assurance which had been provided to it by CBH, and in particular the independent assurance which was provided by external and internal auditors, and this expertise within CBH which added value to the City Council.

A Committee member agreed that the report before the committee demonstrated a good level of focus and governance within CBH. However, he considered that for the Committee to be doing its job properly, it was necessary to consider CBH and the HRA together, as though CBH was an in-house housing association. The HRA owned 5,900 houses, and it had a £205m Capital Programme, which was a significant amount for the Board of CBH to manage. The expertise of CBH was acknowledged, but this expertise was poorly directed at present. Was there a way for the Committee to feed directly into the HRA review, and for the expertise of CBH to be used to consider how the HRA was being managed? The Committee needed to examine this issue more closely as it was suggested that the largest asset of the Council was not subject to audit or proper governance.

The Chair confirmed that the HRA was currently under review as part of the Council’s Fit for the Future programme, and there would be ample opportunity to provide feedback as part of this process, either as individual Councillors, via the Council’s Scrutiny Panel, or via the Governance and Audit Committee. It was appropriate for the Chairs of Scrutiny Panel and the Governance and Audit Committee to determine how best the review was to be scrutinised. Lindsay Barker, Deputy Chief Executive and Executive Director Place, attended the meeting and advised the Committee that she was leading the HRA review for the Council, and this review was being carried out as a cross-organisation review which shared its outcomes with the Council’s Leadership Team and the CBH Board.

A member of the Committee was unsatisfied with this approach, and considered that active participation in the HRA review was well within the remit of the Committee. It was not appropriate to approve a small part of the Council’s activity which was well managed, and ignore activity which was not carried out well at all. He had considered the statutory accounts of CBH and was happy with these, considering that they had been sensibly prepared. It was, however, suggested that it was necessary for the Committee to take its role more seriously, and begin to scrutinise the accounts and not just accept the wording provided in the AGS without supporting figures. The Chair noted that links to the complete accounts of CBH had been provided in the report which was before the Committee, and in the past it had been suggested by the Committee that providing links to extensive documentation in this way would allow those Committee members who wished to examine information in detail to do so, while allowing the main report to be as accessible as possible.

A Committee member considered that the breakdown of Management Fees and Financial Breakdowns which had been provided was helpful, but he still struggled to reconcile these figures against the HRA figures which were contained in the Council’s budget. Benchmarking was important and the management cost per dwelling was something which the Committee had to scrutinise to ensure that the Council was receiving good value. It was important to note that when benchmarking management costs, these were not material costs, and when considering repair and maintenance works, what other costs, such as sub-contractor expenses, labour and project management costs were involved?

The Chief Executive of CBH confirmed that a significant amount of repair and maintenance costs would be attributable to sub-contractors, and it was important to provide a greater explanation to the Committee of how CBH carried out benchmarking. CBH used a housing performance benchmarking consultant, Housemark, who ensured consistency in the measurement of figures and the resulting cost per unit. Housemark were an independent consultancy with many years’ experience gathering information on performance and costs from across local authority housing providers, and a large number of social housing providers used their services. The City Council and CBH were supplementing this information with work with Savills which was ongoing as part of the HRA review, and the result of this would be presented to the Council’s governance structure. The Chief Executive of CBH was confident that this work would demonstrate that CBH was delivering value for money, and further updated on this would be provided on this topic in the future.

The Committee considered the breakdown of costs which had been provided to it, and the differences in the costs which were presented in budget papers. It was suggested that these two elements needed to be presented on the same page and with the same categories, as the two areas were very difficult to reconcile. Was it possible for there to be liaison between CBH and Council Officers in the future to align the CBH costs breakdown and the budget costs breakdown to make the position easier to understand? It was noted that the maintenance cost per dwelling was being reported by CBH as being approximately £1,300, however figures contained within the Council’s HRA accounting indicated that this figure was approximately £2,000 – which figure was correct? A reconciliation between the two figures was of key importance as the difference between the figures was very significant when factored over the large number of properties involved. The difference between the figures being reported was high, and could be as high as £600 per property which it was suggested could be put to use to tackle some of the issues of homelessness which the Council faced. Could the Committee be presented with a breakdown of the Council’s supervision and management costs of approximately £8m which were contained in the HRA? If a full reconciliation was not possible, then at the least such a breakdown should be provided.

The Chair clarified to the Committee that the Council’s budget to tackle homelessness was required to sit in the general fund, and not the HRA, and it would therefore be impossible for CBH to fund activity relating to homelessness from the HRA.

The Chief Executive of CBH acknowledged the comments which had been made, and explained that the way that the management fee had been presented to the Committee reflected how these fees were broken down between the Council and CBH. CBH had endeavoured to provide the specific information that had been requested by the Committee in previous meetings in the interests of transparency. The Chief Executive of CBH would liaise with colleagues in relation to how the HRA was broken down, and reiterated to the Committee that transparency was of paramount importance to him. It was hoped that the Committee would recognise that it had been presented with more information, in a format which was digestible and which allowed searching questions to be asked.

A Committee member noted that costs associated with the provision of Information and Communications Technology (ICT) services had been listed on 2 separate occasions, once for £100,000 and then again for £99,000 as part of other operating costs; how were these figures derived? Was there a double-charge taking place? The Chief Executive of CBH explained that the different figures related to the use of different ICT systems, with £99,000 relating to the general fund relating to homelessness and similar activity, whereas the other ICT costs were for the HRA ICT work and for staff involved in supporting this.

The Deputy Chief Executive and Executive Director Place, confirmed that responsibility for homelessness sat with the Council which was why this was funded from the general fund. It was not possible to fund homelessness services from the HRA as these services did not relate to existing tenants. It was important to show this in a transparent way which is why 2 figures had been provided.

The Committee continued to discuss this issue, and it was suggested that if more housing was provided by CBH to remove people from temporary accommodation then this would naturally serve to reduce pressure on the general fund. The Committee noted that it was not possible for any Council to cross-subsidise either the general fund or the HRA. Where the Council provided services for CBH such as the call centre, these were re-charged at commercial rates, and CBH was similarly compensated for services which it provided to the Council.

In discussion, the Committee noted that the Council was embarking on a new ICT system in conjunction with Epping Forest District Council, was CBH involved in this or was it pursuing its own separate strategy? Geoff Beales, Client Services Manager, attended the meeting and advised the Committee that the Annual Governance Statement which was before it related to 2023/2024, and for 2024/2025 the ICT team for CBH had transferred back into the Council and so would be part of the shared services work being undertaken with Epping Forest District Council.

The Committee sought to understand whether the ICT service would be effectively transferred to Epping Forest District Council, or whether it would remain within the Council, as this could have a significant impact from a risk management perspective if relations between the two authorities were to break down in the future. The Client Services Manager advised the Committee that the ICT staff of CBH had transferred back into the Council, and the work to create a joint service was currently ongoing. The Committee noted that the Council maintained successful joint working relationships with other local authorities in respect of its museums service and the North Essex Parking Partnership, and such relationships would be carefully managed through appropriate service level agreements.

In response to a question from a Committee member, the Chief Executive of CBH confirmed that although a computer programme was used to log the results of staff appraisals, and to provide a structure throughout the process, the appraisal itself was carried out by staff meeting with each other.

RESOLVED that:

- The Committee had considered and commented on the Governance Assurance Statement of Colchester Borough Homes.

- The Committee accepted the assurance provided by Colchester Borough Homes regarding its governance arrangements throughout 2023//24.

The Committee considered the draft Annual Report of Colchester Commercial (Holdings) Ltd, together with its half-year financial position.

The Chair of the Committee requested that particular attention be given in the presentation of the report to outlining the advantages which were provided through the provision of services via the Council’s wholly owned companies, as opposed to sourcing these services from an external provider.

Simon Coward, Managing Director Colchester Commercial (Holdings) Ltd (CCHL), attended the meeting to present the report and assist the Committee with its enquiries. The Committee heard that in return for the service that it provided, CCHL received a management fee of £1.544m from the Council, which had been reduced to £1.32m as CCHL staff had been transferred to the Council to join the new ‘corporate landlord model’. This management fee was predominantly used to cover the closed circuit television (CCTV) service which was provided, but was also used in providing service level agreements (SLA)’s for the hiring of Council venues, and operating costs associated with running the fibre broadband wholesale network. For the £1.32m management fee, the Council received just over £1.8m in value.

The Committee was requested to consider the Annual Report which had been presented to it, and heard that the delay in providing signed accounts had been caused by the process which had been necessary to place 2 of the Amphora companies into hibernation, Colchester Amphora Energy Limited (CAEL), and Colchester Amphora Homes Limited (CAHL). Figures which illustrated the first 6 months trading of CCHL had been provided to the Committee in Part B of the agenda.

A Committee member considered that it was important to understand what assets CCHL had, and who specifically owned these. As far as he could see, all the assets were sitting on the Council’s balance sheet, and CCHL provided services to manage these. Where did the income for the various commercial companies come from, was this all received from the Council or was it generated by the activities of the Events company, including Helpline? It seemed that CCHL was managing the Council’s assets and the position needed to be clearly understood.

The Managing Director of CCHL addressed the question of assets and advised the Committee that in terms of the assets of CAHL, the last flat on the Creffield Road site had now been sold in order that CAEL could be placed into hibernation, and it had no further assets save the leasehold on the entire building which had been transferred to Colchester Amphora Trading Ltd (CATL). In terms of CAEL, there were 2 issues; the first was the loan which had been provided to CAEL by the Council, and the second was the boreholes which related to the work which had been undertaken in respect of the Northern Gateway Heat Network. The boreholes were being transferred to the Council at construction value, and the loan was being written off, and part of the funding for this was coming from the Grant which the Council had received to build the heat network.

There were no assets in the Events business. The assets which were contained within the fibre network fell into 2 areas; the wholesale network which was owned by the Council, and the local area network which was owned by, and was an asset of, Colchester Fibre which paid a concession to the Council to use this network. As the connection was built between the customer and the network, this asset of Colchester Fibre would grow accordingly.

The Managing Director of CCHL responded to a question from the Committee and confirmed that the Council had sought technical advice from its Treasury Management adviser, Link, in respect of the boreholes. This advice had confirmed that the value of the boreholes was the cost of their construction and this was the basis of the transfer.

In relation to the Events business, a Committee member raised concerns about a specific event which had been held in Castle Park during the summer, noting that there had been inadequate toilet and catering provision combined with poor lighting and guidance signage. This was potentially a problem for the Council as although it was event promoters who hired Council facilities, there was still a perception that the Council was responsible for events – was it possible to exert control over these events?

The Committee noted that without a set of fully audited accounts provided, it was not possible to approve the Annual Report which had been presented to it. All the Committee was able to do was to note the draft Annual Report, prior to the re-submission of the finalised Report at a later date.

Considering the provision of the CCTV service, it was suggested that Parish and Town Councils may well consider paying for extra CCTV in their areas, and there was potentially an opportunity to expand the commercial service in this way. Although more staff would be required to monitor any extra cameras, was CATL actively looking to expand the business in this way?

Alistair Wilson, Senior Commercial Manager, Amphora, attended the meeting and acknowledged that the concert in Castle Park had not been without issues, and the Events business was no longer working with the promoter responsible for the event. In relation to CCTV, commercial opportunities were being sought through Colchester Fibre and wider digital services. The CCTV monitoring of the Northern Gateway Park had been secured which was funded through the management fees of the tenants, and discussions were ongoing with other local authorities to potentially take over the monitoring of their CCTV across a wider geographical area. The Committee suggested that other local authorities would include Town and Parish Councils, and this was an opportunity that should also be explored.

A Committee member requested greater operational details of the partnership which existed with OpenInfra, together with additional information about the proposed virtual reality tourism experience, in particular the costs associated with its provision given the relative lack of success of virtual reality ventures over recent years.

The Senior Commercial Manager, Amphora confirmed to the Committee that OpenInfra had undertaken marketing to take on residential customers to generate an open area network. This network then needed to link to the wholesale network via Colchester Fibre for which a fee was paid.

In relation to the proposed virtual reality experience, this was a Town Deal funded project working with the museum service. The contract for the construction of the necessary 5g network at various key heritage points around the city had been awarded, and work would then be undertaken with museums to generate the necessary content and create a sustainable and viable project.

The Committee sought to understand the rationale behind the provision of a dedicated 5g network, how was this different to the 5g which was already commercially available, who the customers were expected to be, and how this additional network would be utilised? It was difficult to explain to the public why the Council was spending money on a 5g network when one already existed, and it was necessary for the Council to work harder to provide clarity on this point.

The Senior Commercial Manager, Amphora, explained that it was intended that the customers of the network would be people who had subscribed through the museum service to obtain the virtual reality experience as visitors to the city. A further, detailed, explanation would be provided to the Committee after the meeting.

The Committee considered that it was necessary to be very clear that what it was approving was a report and not any type of Annual Report. In addition to the missing statutory accounts, it was noted that the Committee had received a report in the past which had contained an Action Plan in relation to CCHL which had included a number of governance recommendations, and it believed not all of these had been implemented. When considering the final accounts, this governance report and the progress made against the Action Plan would also need to be considered to ensure that the advice which had been received was being acted upon.

The Deputy Chief Executive and Executive Director Place acknowledge the importance of following up on this report, and would discuss with the Council’s Corporate Governance Manager how best to bring this back to the Committee.

RESOLVED that:

- The Committee had reviewed and provisionally noted the draft Colchester Commercial (Holdings) Limited (CCHL) Annual Report 2023-24 subject to the future production of the statutory accounts of CCHL, and an update on the CCHL Action Plan which had been presented to the Committee in March 2023.

- The Committee had reviewed and noted the half year financial position of CCHL and its subsidiary companies.

The Committee considered a report setting out its work programme for the current municipal year.

Matthew Evans, Democratic Services Officer, attended the meeting to present the report and assist the Committee with its enquiries. The Committee noted that until this meeting, a verbal update on the progress with the Council’s statement of accounts had been provided to the Committee at each of its meetings. The Democratic Services Officer explained to the Committee that as part of the revision of the work of the Committee which was ongoing, it was intended that a number of meetings during the municipal year were designated as shareholder meetings, when the Committee would be focussed solely on its shareholder functions, and this was one of those meetings.

A Committee member questioned when the Committee would be considering the review of the Housing Revenue Account (HRA) which was currently being undertaken? Would this review be taken into account when considering the Council’s budget, when significant cost savings would be required? Postponing consideration of the review until after the budget had been set would lead to real problems, and it was suggested that the Committee needed to add consideration of the HRA review to its wok programme in the next couple of months.

Lindsay Barker, Deputy Chief Executive and Executive Director Place, attended the meeting and advised the Committee that the ongoing HRA review was being carried out as part of the Council’s Fit for the Future project, and would not be completed until after the budget. It was not intended to rush this important work, and the programme was being overseen by the relevant Portfolio Holder and the Council’s Leadership Team. It was intended to involve all Councillors in a cross-party consideration of the HRA and future investment. All of this work would comply with due process, but at the current time there was no agreement for this work to be speeded up.

The Committee discussed whether, or not, it was possible to introduce an item into its work programme which would provide an update on the ongoing review of the HRA prior to the budget being completed. A Committee member was particularly concerned about the apparent lack of oversight and governance of such an important element of Council finances prior to the completion of the budget. Was it possible for the Committee to make a recommendation to Cabinet, raising these concerns?

The Deputy Chief Executive and Executive Director Place advised the Committee that it had recently received an update on the HRA review which had been presented by the Chief Executive of Colchester Borough Homes, and there would be nothing further to report until the process was ready, and no information which could be offered in additional to that which the Committee had already received. There would be plenty of opportunities for Councillors to be involved in shaping the priorities of the HRA as the process was followed.

A Committee member was not happy to sit as a member of the Committee when there was such a significant gap in knowledge around the HRA. He had been promised at the last Cabinet meeting of the Council that some preliminary information from the HRA review would be available before Christmas 2024, and believed that there was an acknowledgement that the Council could not go through another budget with a £205m Capital Expenditure Programme which was unsustainable. It was remarkable that all the scrutiny of the Committee appeared to be directed towards the managing agent and not directly towards the Council’s largest asset. A review of the Council’s Capital Programme had been promised for some time, and had yet to materialise.

A Committee member sympathised with the points which had been made, but noted the difficulties in fitting an item into the Committee’s work programme. It was suggested that for the preceding 3 years, the Council had voted on a budget with the knowledge that the HRA element of the budget would not take place as it was under review. This position was unsatisfactory and all Councillors should feel uneasy with approving a budget which was to be the subject of change.

Councillor King, Leader of the Council and Portfolio Holder for Strategy, attended the meeting, and, with the permission of the Chair addressed the Committee. He reminded members of the Committee that discussions around the HRA review had taken place in the past, and these discussions had acknowledged the fact that the review would unavoidably not be completed before the budget setting period, as it was necessary to follow the correct process. In the long term, the Council’s position would be subject to change and guidance provided by government. He had, however, said that consideration would be given before Christmas 2024 to what was known, and how this would affect the Council’s borrowing, building and related maintenance expenditure plans for the HRA. It was intended that this knowledge would feed into the budget process.

RESOLVED that: the contents of the work programme be noted.